According to an official interpretation of the Double Taxation Avoidance Agreement between Greece and Cyprus (DTAA) issued by the International Economic Relations Directorate (IERD) of the Greek Ministry of Finance, dated 31 March 2016, the Cyprus corporate income tax (12,5%) can be credited against the Greek tax on dividends (15%).

The interpretation states that a tax credit must be granted on the computation of the Personal Greek tax liability on the ordinary dividends issued by a Cyprus tax resident company towards Greek tax resident shareholders for the Cyprus tax withheld on the dividend distribution (0%) as well as for the corporate tax suffered in Cyprus (12,5%) for the company’s taxable profits. As a result, the additional personal tax imposed in Greece for the dividends is limited to 2,5%, with the total tax liability being 15%.

Based on the interpretation of the IERD, the proper use of Cyprus resident companies gains a significant competitive advantage over using companies from other jurisdictions. It is noted that the interpretation cannot offer any advantage unless the proper structuring is implemented.